1. In this problem, you play an accountant, for the Korean balance of payments. a. Show how each of the following would affect the balance of payments in Korea. For each of the following transactions, fill in the table below. Each transaction has to enter in the appropriate sub-account with the corresponding credit (+) and debit (-). Note that values are in millions of Korean wons. Include a short description on how each transaction is recorded (e.g., exports of goods, CA +1; inflow of unilateral transfers, CA +2; imports of assets, FA -1 ; and so on). (1) A Korean firm pays W4 by check to Allianz, a German firm, for insurance services. (2) U.S. Steel, an American firm, buys steel from Posco, a Korean firm, for W2 and agrees to pay 8 months later (3) LG Electronics, a Korean firm, receives W3 as profits from its subsidiary in the U.S., which are paid into an American bank. (4) A Korean firm forgives a W3 debt owed by a foreign firm. (5) A Japanese citizen buys stock in Samsung Electronics, a Korean firm, worth W4, paying by check. (6) The Korean government donates w5 worth of medical equipment to a developing nation. (1) (2) (4) (5) (6) Total Current Account Capital Account Financial Account b. Compute the values of following balances. (Check whether the value of current account balance + capital account balance + financial account balance" equals zero.) (1) Current account balance (2) Capital account balance (3) Financial account balance 1. In this problem, you play an accountant, for the Korean balance of payments. a. Show how each of the following would affect the balance of payments in Korea. For each of the following transactions, fill in the table below. Each transaction has to enter in the appropriate sub-account with the corresponding credit (+) and debit (-). Note that values are in millions of Korean wons. Include a short description on how each transaction is recorded (e.g., exports of goods, CA +1; inflow of unilateral transfers, CA +2; imports of assets, FA -1 ; and so on). (1) A Korean firm pays W4 by check to Allianz, a German firm, for insurance services. (2) U.S. Steel, an American firm, buys steel from Posco, a Korean firm, for W2 and agrees to pay 8 months later (3) LG Electronics, a Korean firm, receives W3 as profits from its subsidiary in the U.S., which are paid into an American bank. (4) A Korean firm forgives a W3 debt owed by a foreign firm. (5) A Japanese citizen buys stock in Samsung Electronics, a Korean firm, worth W4, paying by check. (6) The Korean government donates w5 worth of medical equipment to a developing nation. (1) (2) (4) (5) (6) Total Current Account Capital Account Financial Account b. Compute the values of following balances. (Check whether the value of current account balance + capital account balance + financial account balance" equals zero.) (1) Current account balance (2) Capital account balance (3) Financial account balance
